Sirius XM Cramer Wars Part II 37 comments
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There has been a lot of reaction to my latest SiriusBuzz article regarding Jim Cramer, Goldman Sachs (GS) and a whole bunch of Sirius XM (SIRI) convertibles they hold. Seeing as the article deals a lot with perspectives, I’d like to offer yet another perspective. I realize that I may be beginning to sound like a person who needs heavy doses of medication with this one, but see if you can follow me on this…
Let’s assume that Cramer is in fact a Goldman puppet, as many have speculated in the past. I am not saying he is, but for argument's sake just go along with it. What if ( and I stress “what if” ) Goldman holds too many of these convertibles? What if Goldman is looking to dump these convertibles but as yet has found no takers? What if, in an attempt to create a market for these converts, they talked Cramer into a new line of thinking, knowing he would announce them on national television? “Buy! Buy! Buy! The converts! “
The problem is that near as I can tell, Goldman Sachs is the number one holder of these convertibles. Next in line is Bank Of America (BAC), although they hold a miniscule position, comparatively. The implication I’m of course making is that Goldman itself would have the most to gain from these proposed convertible sales, and Cramer’s recommendation to purchase these converts benefits his former firm more than any individual investor. Broker calls client, explains how Jim Cramer recommends them as an investment also, and “BAM!,” trade is executed.
With Sirius XM’s credit rating looking to improve near term, the value of these convertibles in the open market declines, which means a drop in Goldman's portfolio. By keeping the stock price suppressed, if that is in fact what these bond bullies are doing as Cramer suggests, the convertibles become more attractive to buyers. Imagine the sales pitch of offering for sale a plus 4.00 stock for 1.40 a share, at a predetermined time that the bond bullies decide to cover. A separate argument could then be made that this is the reason that Goldman has been accumulating shares while lowering their price targets.
It’s just possible that Goldman knows these convertibles are a losing proposition for Goldman, and would like someone….anyone... to take them off their hands. I know I’m not making friends with any of this, but as an unsophisticated investor, I’m doing my best to improve my understanding of sophisticated investments.
Position: Long SIRI, no position GS, BAC
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This article has 37 comments:
When I first saw Cramer my immediate reaction was HEY, WAIT A MINUTE!! My understanding from reading the 8K's that SIRI filed first week of August explaining the issuance of the converts was these were UNREGISTERED PRIVATE PLACEMENTS, issued under Rule 144A, available ONLY to qualified institutional investors, and NOT AVAILABLE to retail investors like you and I. So my feeling is all this discussion is moot.
I haven't until now expressed this thought elsewhere. I invite comment from those of you who have some real insight on this subject, not the many of you who (like Cramer in this case---I think!) have no real knowledge!
A
The bonds that GS does own are Sirius 2-1/2% converts expiring in Feb. 09 and are unsecured by any of Sirius' assets. They are convertible at a $4.41 / share rate, meaning share price would have to be considerably higher for anyone to convert. They were issued in Feb. 04 ($250 Mil) and March 04 (50 Mil). Needless to say these bonds were shorted a long time ago by GS who does hold $127 Mil of these converts or 42.3 % of the 300 Mil face value.
GS also holds around $73 Mil of the $400 Mil, 1.75% converts the XM has coming due in Dec. 09. I am struggling to see what their investment in these converts has to do with their manipulation of the stock price at this time.
My question on these cvt issues is the same---IS THERE A PUBLIC MARKET? I have never seen one-- no Moody ratings, no quotes, no listing on quantumonline.com, no listing in Moody's monthly big red Bond Record, etc etc. Further, I have just 5 minutes ago had a phone conversation with the FI Dept at my large national brokerage and they can find NOTHING to help me on my question "How can I buy these bonds?" They say any unregistered 144A private placement issuance would not be on any of their data bases, and they suspect these cvts were originally so issued.
Can you amplify? CUSIP numbers would indeed be helpful.
There were 262.4 Mil shares lent to the share borrowers to the Share Borrowing Institutions to consummate the 13% Bond sales for XM. There are 183.7 Mil shares available (lent) for the purpose of "shorting" and supporting the XM 13% convertible bond sale concurrently. In addition for every share involved in the lending process and utilized by the purchasers of the bonds, the share borrowing institutions agree to purchase an equal "long" stock position for every share shorted by the bond holding institution (this is meant to minimize the shorting activity). The rest of the shares are held by the share borrowing institutions for sale to the public from "time to time" as they institutions decide and will announce. In all cases when the in 2014 when the bonds mature the shares must be returned to Sirius Xm Radio by the borrowing institutions.
In short, without the details, you can see how confused this transaction is to the average: "I Like The Product" Investor. So Cramer and anyone else can just scream out when they see the 13%, "Buy the converts" but there is now way to do that. The bottom line for this company and the common shareholder, will be for them to increase all of their revenue streams available in such a way as to totally overwhelm their debt obligations. Over time paying off the debt and then buying back shares will result in long term increased shareholder value.
2. Following from point one, saying "Jim Cramer recommends X as an investment," is like saying, "Ben Stein says you should own a variable annuity." (He does, and sales of variable annuities are not picking up.)
3. General Electric and its various subsidiaries surely have some sort of policy that discourages its employees from using company property to further massive securities fraud schemes. That may even extend to Jim Cramer having all or most of his money in blind trusts or something, since, you know, he talks about stocks and stuff.
And I Don't mean the CASUAL Day Trader, Or Audience Member--I Mean People That hold SUBSTANTIAL Sirius Stock, Or Debt.
EMIL J KOVACH JR
217738, As far as the stock price, my outlining of the stock lending on the recent converts at the time of merge was simply to clear up the confusion about these shares. They are not as dilutive as everyone has described, hyped, and shorted the stock on. If you want to buy these 13% notes, you can't. If you want to use these lent shares as a retail investor to short the stock: "Forget about it", period. Of course your and my explanation of what the company needs to do is obvious to raise the price of the stock. The company, after the FCC appeals date, around noon on the 27th of August, and after Labor Day needs to announce plans for the Debt, plans for the Debt, and plans for the Debt refinancing, along with solid well defined guidance on merger, increased revenue programs, an Oh Yeah, all the new toys to listen to their content on. By the way did I say they need to define a way to explain their plans for paying down the DEBT.
I think you are mistaken, at least with XM content on Directv you can not use any of the recording features of a DVR/Tivo
I believe the post Labor Day guidances must give line-by-line and quarter-by-quarter specific goals that are realistic and PROVE 2009 CF positive, not just more hype and platitudes. I sure will be tuned in!
1- Stand behind the GS analyst
2- While holding a Convicted Sell Rating they were holding almost 1 million shares.....
3- But then once they show that the only good thing about this transaction (merger) and still if you can believe it, all the while still touting a Convicted Sell Rating THEY - GS!.... Actually have bought hundreds of thousands of more deflated shares shares sold in panic on their recommendation to sell ASAP!....
4- they stayed safe still playing the ARB game, coupons at one end and shoring up "long' on the other end conveniently provided by a GS Analyst sell rating....
5-They looked like they are just bond holders but there not... they could convert the bonds or lose a % if -WHEN the stock moves from this low point......... and they know it will, hell they started this run on the stock with one Rating change....
Just check PLEASE!!! the GS holdings before the merger then check the recent record of the last two weeks on GS holdings...PLEASE!...T... WRITE AN ARTICLE on how a company can say to their customers.SELL SELL SELL! so we can buy buy buy!!!!... then tell me if there isn't something up!!!!
Thanks RONQ NNJ
I'm having a hard time believing this.
sec.gov/Archives/edgar...
Looking at the entire filing, which of course is a mile long and has many hundreds of issues very many of which are in $$$ amounts that are 'peanuts' for GS, I just cannot believe GS would in effect have a proprietary unbelievably diversified inhouse mutual fund where every one of the issues listed in the filing represents a conscious bullish investment decision by the highly paid GS hotshots. What say you on this thought?
The above description that I used for 13% notes are actually for the XM recently filed and currently being offered are the 7% Exchangeable Senior Subordinated Notes due in 2014.
I did a break down on put / call ratios and they represent a bullish hedge for siri and a bearish trend for XM. I put little weight in this assessment without knowing their overall "short" interest in each.
I think I have my decimal point OK and if so the total adds up to (my corrected total) 9.513 million shs pre merger 6/30/08., about 6.3% of the company. Note GS is not listed as owner in the Yahoo "insider" pages, which supports my above thinking.
If they are in fact true beneficial owners of these shares and are same time involved in a shorting strategy, all short positions up to this 9.513M share total are "against the box", are a 'wash', and pointless.
My bet is the GS company DOES own the $127.7M mkt val of the 2/09 cvts as an investment and any shorting of the common ---arb activity against this position--- makes sense, although even the sagacity of holding the cvts is mitigated by the slim 2 1/2 percent coupon and the big market price movement needed to get to $4.41 conversion.